Mortgage interest rates are signalling a return to lower inflation

The pricing of fixed-rate mortgage deals shows that markets are still betting on a return to lower inflation and low rates, says Cris Sholto Heaton.

Bank of England
Markets expect the Bank of England to raise rates, then cut them again by 2024
(Image credit: © Alex Segre / Alamy)

Anybody who has been looking at mortgages recently may have noticed something surprising. If you want a two-year fixed-rate mortgage on a 60% loan-to-value, you could get 3.82% from First Direct, for example. However, if you want a five-year fix, you’d pay 3.58% at the same lender – ie, a lower rate. And if you’re going for a ten-year fix, the offer is 3.83% – only 0.01 percentage point more than the two-year.

I’m using First Direct here because it’s a clean example of the point – the terms across its mortgages are similar and there aren’t huge differences in early redemption charges or other nuances. But the same applies at many other lenders as well.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.